Bankers must show restraint on bonuses

Monday 15 November 2010 11:55 BST

Britain's financiers are neither unintelligent nor immune to popular opinion: they are aware that the spectacle of bankers getting big bonuses in the New Year as public spending cuts bite will play badly with the public.

There are good grounds, therefore, for the British Bankers Association to consider ways the big banks could show restraint in this area, though it has denied that it has a concerted plan to do so.

And if sensitivity to public opinion were not enough incentive, the Business Secretary, Vince Cable, has been thinking aloud about raising taxes on the industry if it does not mend its ways.

Indignation at overpaid bankers is a natural impulse, especially since we only got through the banking crisis by dint of the state underwriting the banks' activities. But we should be wary of raids on the financial sector; the City delivers £31 billion a year in tax and funds many public services. It remains the engine of the economy.

There are, moreover, difficulties in imposing any external restraints on bankers' bonuses — which are now being structured in less blatant ways in any event.

The Office of Fair Trading would be obliged to intervene if the banks seemed to be colluding in setting remuneration rates; this would, perversely, be seen as against the public interest.

And there is the more realistic consideration that if financiers' pay were curbed in Britain, some of them, particularly non-British players, could move elsewhere in what is a global market. Londoners are not, perhaps, inclined to take seriously the threat that bankers would move to Switzerland; we might, however, entertain the possibility that some could be attracted by New York.

The only answer is for financial services institutions to exercise some restraint themselves. As we report today, they are obliged to do so in any event: some headhunters report that remuneration rates this year could fall by 30 per cent. So it would be timely as well as prudent for the City to take account of sentiment in the world outside and curb the extent of bonus payouts, at least for now.

Open justice

The Lord Chief Justice, Lord Judge, has previously declared that the justice system should be as open as possible.

So he is going with the grain of his own policy with his swift response to a complaint from this paper's Martin Bentham at being excluded from a fraud hearing at the Royal Courts of Justice.

Mr Bentham was obliged to leave the Administrative Court during the hearing because the defendant objected to his presence and the presiding judge, remarkably, went along with the objection, telling our reporter he would be at liberty to report his final judgement.

But the process of justice is as important as the outcome; the sensitivities of accused individuals could close other hearings on this basis. The truth is that bureaucracies naturally tend to secrecy and closed processes can easily become habitual, even when there is no good reason for it.

Lord Justice Judge's decision to review the arrangements at the Administrative Court so that hearings are open where possible is a good response to a pernicious trend in the justice system.

The price of liberty

It is, of course, good news that Paul and Rachel Chandler are free; much less good that a ransom was paid to their Somali captors.

But this is common practice: states as well as families pay for Somali pirates to release crews and vessels. It is outrageous that we should be held to ransom by bandits of a failed state. Britain should lead a concerted global fightback against this menace.